Botswana’s biggest grocer, Choppies Enterprises has announced that it was able to raise P300 million through a rights offer.
Choppies first announced the rights offer during the first week of June 2023 saying the proceeds will be used to restructure the retail group’s balance sheet which is weighted by liabilities.
A rights offer, also known as a rights issue or a rights offering, is a corporate finance mechanism through which a company raises additional capital by offering its existing shareholders the opportunity to purchase additional shares at a discounted price.
At the time of the first announcement, Choppies said that it had received a commitment from its major shareholders, including those holding more than 10 percent of the issued share capital of the company, to follow its rights in terms of the rights offer and subscribe for 260.1 million rights offer shares.
Choppies’s major individual shareholders, who are also founders Ramachandran Ottapathu and Farouk Ismail agreed to follow their rights in terms of the rights offer up to an amount of approximately P150 million.
On Friday, through a statement circulated in the capital markets, the retailer said that “the Rights Offer closed at noon Botswana / South African time on Wednesday, 28 June 2023 and Choppies is pleased to advise that the full P300 000 000 was raised”.
A breakdown of where the capital came from shows that 51.36 percent was from shareholders, 37.65 percent from the underwriter (Ivygrove Holdings Proprietary Limited), and the remaining 10.98 percent from d Export Marketing (BVI) Limited.
Mounting debt….
In particular, Choppies made it clear that it intends to utilise the proceeds of the rights offer, being P300 million, to reduce bank debt, extinguish debt owed by the company to certain shareholders, and settle the costs relating to the rights offer.
The company owes amongst others the founding CEO, Ramachandran Ottapathu who is set to receive P111 million, and another founder Farouk Ismail who will be paid P24 million.
The company also said it owed Shanta Retail Holdings as much as P34 million while an unnamed bank’s outstanding debt is at P51 million.
The BSE-listed retailer said in early June that it had budgeted at least P5 million as associated costs of the rights issue.
In 2021, Choppies closed its stores in South Africa, Kenya, Tanzania, and Mozambique following mounting losses from the operations. The expansion weighed heavily on Choppies and caused a rift between company founders and shareholders who were troubled by the diminishing profits and dividends.
